Q1 2025 10x Genomics Inc Earnings Call

Operator: Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking statements within the meaning of federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated. and you should not place undue reliance on forward-looking...

Is that management will make statements. During this call that are forward looking statements within the meaning of federal securities laws.

These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated and you should not place undue reliance on forward looking statements.

Operator: Additional information regarding these risks, uncertainties, and factors that could cause results to differ appears in the press release 10X Genomics issued today and in the documents and reports filed by 10X Genomics from time to time with the Securities and Exchange Commission. 10X Genomics disclaims any intention or obligation to update or revise any financial projections or forward-looking statements. whether because of new information, future events, or otherwise.

Additional information regarding these risks uncertainties and factors that could cause results to differ appears in the press release tax genomics issued today and in the documents and reports filed by kind of genomics from time to time with the Securities and Exchange Commission.

Tennis genomics disclaims any intention or obligation to update or revise any financial projections or forward looking statements, whether because of new information future events or otherwise.

Speaker Change: Joining the call today, our third <unk>, our CEO and co founder and Adam <unk>, Our Chief Financial Officer.

Cassie Corneau: Joining the call today are Serge Saxonov, our CEO and co-founder, and Adam Taich, our Chief Financial Officer. We will host a question and answer session after our prepared remarks.

Speaker Change: We will host a question and answer session. After our prepared remarks, we ask analysts to please keep to one question. So that we may accommodate everyone in the queue.

Operator: We ask analysts to please keep to one question so that we may accommodate everyone in the queue.

Serge Saxonov: With that, I will now turn the call over to Serge.

Speaker Change: With that I will now turn the call over to Serge.

Serge: Thanks Scott.

Serge Saxonov: Thanks Cassie and good afternoon everyone. Today I'll cover Q1 performance and share updates on how we're navigating the rapidly evolving macro environment. I'll also walk through recent business developments before handing it over to Adam for the financial review and outlook. Total revenue for the first quarter was $155 million. During the quarter, we settled our worldwide patent litigation with VizGen on very favorable terms. As one component of the settlement, we received an uptick of $26 million that we allocated in part to operating expenses related to gain on settlement and in part to license and royalty revenue.

Serge: Good afternoon, everyone today I'll cover our Q1 performance and share updates on how we're navigating the rapidly evolving macro environment.

Adam: I'll also walk through recent business developments before handing it over to Adam for the financial review and outlook.

Adam: Total revenue for the first quarter was $155 million during the quarter, we settled our world wide bathroom litigation with vision various favorable terms.

Adam: As one component of the settlement really cheap enough.

Adam: 2% to $6 million.

Adam: I'll, let David embark to operating expenses related to gain on settlement as important to license and royalty revenue.

Adam: Okay.

Serge Saxonov: Excluding the portion allocated to license and royalty revenue, our first quarter revenue was $138 million, down 2% year-over-year, primarily driven by a significant decrease in instrument revenue, offset by continuous strength in consumables, a sign of solid core demand and growing usage across our platform. Our Q1 results demonstrated clear signals that customer demand for our products is robust and reinforced our conviction in the long-term growth potential ahead, which I will discuss more later.

Adam: Excluding the portion allocated to license with royalty revenue, our first quarter revenue was $138 million down 2% year over year, primarily driven by a significant decrease in instrument revenue.

Adam: The continued strength in consumables assigns a solid core demand and growing usage across our platforms.

Adam: Our Q1 results demonstrated clear signals that the customer demand for our products is robust and reinforced our conviction in the long term growth potential whatever.

Adam: Which I will discuss more later.

Adam: But first I'd like to take a moment to reflect on the significant changes in the macro environment since the beginning of the year changes that went far beyond what any of us expected.

Serge Saxonov: But first, I'd like to take a moment to reflect on the significant changes in the macro environment since the beginning of the year, changes that went far beyond what any of us Signs of risk and uncertainty across academic research funding and the macro landscape begin with a cap on indirect funding from the NIH. And since then, the research funding environment has continued to deteriorate, particularly across US academic and government labs. Within U.S. academic and government research funding, we're seeing two distinct but interconnected dynamics. First, there are real-time effects impacting our customers today, including delays, reductions, and outright cancellations of grants.

Adam: Signs of risks and uncertainties across academic research funding and the macro landscape begin with a cap on the indirect funding from the NIH and since then the research funding environment has continued to deteriorate, particularly across U S academic and government labs.

Adam: Within the U S academic and government research funding, we're seeing two distinct but <unk> dynamics.

Adam: First there are real time effects impacting our customers today, including delays reductions in outright cancellations of grounds.

Serge Saxonov: Second, there is a growing threat of future changes, such as proposed budget cuts, implementation of indirect NIH funding caps, and widespread concern over further grant review delays or project cancellations. Taken together, these pressures are creating a climate of deep uncertainty. We're increasingly hearing from customers that the combination of actual cuts and looming risks is making them hesitant to initiate new projects or invest in capital purchase. The uncertainty for our customers is driving increasingly unpredictable customer purchasing behavior and reduced visibility on our outlook for the year. Approximately 40-50% of our revenue is supported by U.S. academic and government research funding.

Adam: Second there is a growing threat of future changes such as proposed budget cuts implementation of indirect NIH funding caps and widespread concern over further grant review delays a project cancellations.

Adam: Taken together these pressures are creating a climate of deep uncertainty, we're increasingly hearing from customers, but the combination of actual cuts and looming risks is making them hesitant to initiate new projects or investments capital purchases.

Adam: The uncertainty for our customers is driving increasingly unpredictable customer purchasing behavior and reduced visibility on our outlook for the year.

Adam: Approximately 40% to 50% of our revenue is supported by U S academic and government research funding.

Serge Saxonov: As a result, we announced earlier today that we're withdrawing our full-year revenue guidance and implementing quarterly guidance beginning with Q2.

Adam: As a result, we are.

Announced earlier today that we're withdrawing our full year revenue guidance and implementing quarterly guidance beginning with Q2.

Adam: Adam will share additional context on our outlook.

Serge Saxonov: Adam will share additional context on our Outlook. While the current environment is undeniably difficult and unpredictable, I am confident that we are well equipped to navigate through this period and emerge stronger. We're seeing increased usage of our products driven by price elasticity and the emergence of new applications. both of which support the long-term expansion of our opportunities.

Adam: While the current environment is undeniably difficult and unpredictable I'm confident that we're well equipped to navigate through this period and emerge stronger.

Adam: We're seeing increased usage of our products driven by price elasticity and emergence of new applications.

Adam: All of which support the long term expansion of our opportunity.

Adam: Our recent slate of product launches continues to resonate with customers and further extends our technology leadership.

Serge Saxonov: Our recent slate of product launches continues to resonate with customers and further extends our technology leadership that, together with our roadmap, positions us extremely well for the For more information visit www.fema.gov We have completed our sales reorganization, giving us the structure, coverage, and focus we need to take on today's challenge. And we have a strong cash position that we're actively protecting through this turbulence. We have implemented a reduction in both headcount and non-headcount related expenses across the company. This week, we reduced our global workforce by approximately 8%. While these changes are never easy, they will allow us to be a more efficient organization, better positioned to navigate today's environment, while continuing to invest in our highest priorities.

Together with our roadmap positions us extremely well for the future.

Adam: We have completed our sales reorganization, giving us the structure coverage and focus we need to take on to these challenges.

Adam: And we have a strong cash position those were actively protecting through this turbulence we have implemented a reduction in both head count and non head count related expenses across the company.

Adam: This week, we reduced our global workforce by approximately 8%.

Adam: While these changes are never easy they will allow us to be a more efficient organization.

Adam: Better positioned to navigate today's environment, while continuing to invest in our highest priorities.

We recognize that the strength of our balance sheet is an asset.

Serge Saxonov: We recognize that the strength of our balance sheet is an asset. We have the result to protect it and the levers to further adjust expenses if necessary. Importantly, our fundamentals remain strong, and we continue to have full confidence in our ability to capture the large opportunities ahead. To that end, we saw multiple positive developments in Q1 that underscored the strength of our platforms and reinforced our conviction in our mission. First, we saw solid signs of single-cell elasticity demonstrated by robust year-over-year growth in chromium reaction volumes. This growth was supported by strong adoption of Reflex and universal on-chip multiplexing products, both of which are specifically designed to boost volumes through lower cost per cell and per cell.

Adam: We have the result of protected the levers to further adjust expenses if necessary.

Adam: Importantly, our fundamentals remain strong and we continue to have full confidence in our ability to capture the large opportunities ahead.

To that end with some multiple positive developments in Q1 that underscores the strength of our platforms and reinforce our conviction and our mission.

Adam: First we saw solid signs of single cell elasticity demonstrated by robust year over year growth in chromium reaction volumes.

Adam: This growth was supported by strong adoption of our flex and universal onshore multiplexing products, both of which are specifically designed to boost volumes through lower cost personnel and per sample.

Adam: Second we're continuing to see increases in usage demonstrated by strong growth xinyuan consumable revenue and volume.

Serge Saxonov: Second, we're continuing to see increased xenium usage, demonstrated by strong growth in xenium-consumable revenue and volatility. Our Xenium platform keeps gaining traction among new customers. while our earliest and largest users continue to grow their utilization. Researchers are drawn to Xenium for its ability to elucidate biology that was previously inaccessible at a resolution and scale that were inconceivable until recently. And as researchers use the platform, they increasingly recognize genius, robustness, accuracy, superior data quality, and ease of use. Third, our recent and upcoming product launches are resonating with customers and continue to advance our leadership in single-cell and spatial biology.

Adam: Our <unk> platform keeps gaining traction among new customers, while our earliest and largest users continued to grow their utilization.

Adam: Researchers are drawn to <unk> for its ability to elucidate biology, there was previously inaccessible as a resolution and scale the word inconceivable until recently.

Adam: And as researchers use the platform they increasingly recognize genius robustness accuracy superior data quality and ease of use.

Adam: Third our recent and upcoming product launches are resonating with customers and continue to advance our leadership in single cell and spatial biology.

Adam: Our German technology has been delivering great advances for single cell analysis recently, she has become a leading approach for unbiased visual discovery and <unk> assays have gained rapid adoption of course of our customer base.

Serge Saxonov: Our Genomics technology has been delivering great advances to single cell analysis. VizioMHG has become a leading approach for unbiased spatial discovery, and Xenium 5K assays have gained rapid adoption across our customer base. At the AGBT conference in late February, we unveiled innovations across all three platforms, including a new plate-based chromium flux product to massively extend scale and the number of samples per run. Expanded cloud-based capabilities to support large project analysis. Continued expansion of our Visium platform with Visium HD 3 Prime, Visium Cell Segmentation, and Visium HD XL. and Zinium RNA protein to enable multi-omic analysis on the same tissue set.

Adam: At the <unk> conference in late February we haven't revealed innovations across all three platforms, including a new blade based chromium flex product to massively expand scale and the number of samples per run <unk>.

Adam: Expanded cloud based capabilities to support the large project analysis.

Adam: Continued expansion of our vision platform with resumes G III, Brian lithium cells recommendation and vision HD XL.

Adam: And Xinyu RNA protein to enable multi ohmic analysis on the same tissue section.

Adam: Together these launches strengthen our roadmap and deepen our ability to serve all of our customers, including Biopharma and translational researchers as well as those working on consortium scale studies.

Serge Saxonov: Together, these launches strengthen our roadmap and deepen our ability to serve all of our customers. including biopharma and translational researchers, as well as those working on consortium scales. Finally, we're seeing a trend of exciting new use cases driven by the imperative for larger scale analysis and the promise of single cell and spatial in opening up new clinical research applications.

Adam: Finally, we're seeing a trend of exciting new use cases, driven by the imperative for larger scale analysis, and the promise of single cell and spatial and opening up new clinical research applications.

Serge Saxonov: Let's talk about some of the notable examples from the last few months. A powerful and accelerating wave across research is the use of AI with massive single-cell data sets to uncover patterns, generate insights, and accelerate discovery in ways that simply weren't possible before. Building on the collaboration we announced in February with the Chan Zuckerberg Initiative to launch the Billion Cell Project, we have several other initiatives underway. We recently announced a partnership with AHRQ Institute to accelerate the development of the AHRQ Virtual Cell Atlas, an ongoing effort to create large-scale, high-quality virtual cell models. Leveraging our ChromiumFlex assays, ARC researchers will be able to generate perturbational data at unprecedented scale and quality.

Adam: Let's talk about some of the notable examples from the last few months.

Adam: A powerful an accelerating way across research is the use of AI with massive single cell datasets to uncover patterns generally deal size and accelerate discovery in ways that simply weren't possible before.

Adam: Building on the collaboration we announced in February with a channel Zuckerberg initiative to launch the 1 billion cell project.

Adam: We have several other initiatives underway.

Adam: We recently announced a partnership with Art Institute to accelerate the development of the RF virtual cell Atlas and ongoing effort to create large scale high quality virtual cell models.

Adam: Leveraging our chromium flex assays arc, researchers will be able to generate <unk> data at unprecedented scale and quality.

Serge Saxonov: We're excited to enable the creation of increasingly powerful AI models in biology to support AI-driven insights into human health and disease and help accelerate drug discovery. In addition, Immune AI and the Park Institute for Cancer Immunotherapy are using our GEM-X technology to accelerate the creation of one of the largest single-celled immuno-oncology data sets. This effort aims to support the identification of immune response and resistance patterns. ultimately helping researchers uncover clinically relevant mechanisms that could inform the next generation of cancer therapy. With increasing recognition of the power of single cell and spatial technologies in translational research, there have been more and more publications focused on uncovering spatial biomarkers of disease progression and progress.

Adam: We're excited to enable the creation of increasingly powerful AI models, and biology to support AI, driven insights into human health and disease and help accelerate drug discovery.

Adam: In addition, immune AI and the Parker Institute for cancer immunotherapy are using our <unk> technology to accelerate the creation of one of the largest single cell immuno oncology deal size.

Adam: This effort aims to support the identification of the immune response and resistance patterns.

Adam: Ultimately, helping researchers uncovered clinically relevant mechanisms that could inform the next generation of cancer therapies.

Adam: With increasing recognition of the power of single cell and spatial technologies and translational research there had been more and more publications focused on uncovering spatial biomarkers of disease progression and drug response for example, investigators from the Spanish National accounts or research center using them and reason to.

Serge Saxonov: For example, investigators from the Spanish National Cancer Research Center used Zinium and Visium to retrospectively analyze samples from the recent Dutrino trial of patients with bladder cancer. The study uncovered spatial relationships and cell-to-cell interactions associated with treatment responses. Another study, in cancer cells, used zinium to analyze samples from the FASCINATE-N Phase 2 trial of a novel antibiotic drug conjugate in HER2-positive breast cancer. The researchers characterized key immune cell subtypes, spatial niches, and specific interactions between immune cells and tumors. that identify spatial biomarker signatures that were predictive of treatment response, highlighting the promise of spatial biology to help guide patient stratification strategies and therapy selection.

Adam: Actively analyzed samples from our recent <unk> trial of patients with bladder cancer. This study uncovered spatial relationships in cell to cell interactions associated with treatment responses.

Adam: Another study in cancer cell uses <unk> to analyze the samples from the fascinate them phase II trial of a novel antibody drug conjugate in her two positive breast cancer the.

Adam: The researchers characterized key immune cell subtypes special niches and specific interactions between immune cells and tumor cells.

Adam: Identified spatial biomarker signatures that were predictable treatment response, highlighting the promise of spatial biology to help guide patient stratification strategies and therapy selection.

Adam: Also in a recent study in nature, researchers used <unk> and other tools to uncover spatial biomarkers associated with liver cancer recurrence.

Serge Saxonov: Also, in a recent study in Nature, researchers used bismuth and other tools to uncover spatial biomarkers associated with liver cancer recurrence. They use these biomarkers to construct a tumor immune microenvironment spatial predictive score that performs substantially better than standard patient risk certification methods, pointing the way to more personalized disease management of this and other cancers. We have deep conviction grounded in growing evidence that our tools represent the future of biological research, drug development, and diagnostic research. We're committed to realizing that future, despite the challenges in front of us, and we're focused on serving our customers through these tumultuous times.

Adam: Use these biomarkers to construct the tumor immune microenvironment spatial predictive score this performed substantially better than standard patient risk stratification numbers, pointing the way to more personalized disease management of this and other cancers.

Adam: We have deep conviction grounded and growing evidence that our tools represented the future of biological research drug development and diagnostics, we're committed to realizing the future. Despite the challenges in front of us and we're focused on serving our customers through these multiple times.

Serge Saxonov: I'd like to thank our team for keeping that goal front and center, for their continued dedication, and for their resilience through this period. It is because of their efforts, I feel so confident we're well positioned to execute and lead this next chapter.

Adam: I'd like to thank our team for keeping that gold front and center for their continued dedication and for their resilience through this period. It is because of their efforts I feel so confident we're well positioned to execute and lead this next chapter.

Serge Saxonov: With that, I'll turn the call over to Thank you, Serge.

al: With that I'll turn the call over to al.

al: Thank you Serge I'll start by reviewing our financial results for the three months ended March 31, 2025, and we will then provide further details on our updated outlook for 2025.

Adam Taich: I'll start by reviewing our financial results for the three months ended March 31, 2025, and we'll then provide further details on our updated outlook for 2020. All growth rates provided will be on a year-over-year basis, unless otherwise noted. Total revenue for the quarter was $154.9 million. Excluding the license and royalty revenue from the settlement, first quarter revenue was $138.1 million, down 2%. Total consumables revenue was $115.4 million dollars, up 5%. Chromium consumables revenue was $84.1 million approximately. Spatial consumables revenue was $31.2 million, up 18%, driven by xenium consumables.

al: All growth rates provided will be on a year over year basis, unless otherwise noted.

al: Total revenue for the quarter was $154 9 million.

al: Excluding the license and royalty revenue from the settlement first quarter revenue was $138 $1 million down 2%.

al: Total consumables revenue was $115 $4 million up 5% premium consumables revenue was $84 1 million approximately flat special consumables revenue was $31 $2 million up 18% driven by Veniam consumables revenue.

al: Moving onto instruments total instrument revenue was $14 $8 million down 42% chromium instrument revenue was $5 9 million down 25% driven primarily by lower average selling prices special instrument revenue was $8 $9 million.

Adam Taich: Moving on to instruments. Total instrument revenue was $14.8 million, down 42%. Chromium instrument revenue was $5.9 million, down 25%, driven primarily by lower average selling. Spatial instrument revenue was $8.9 million, down 49%, driven primarily by fewer instruments sold. Looking at our revenue by geography, America's decreased 7% to $73.8 million, EMEA decreased 8% to $31.9 million. APAC increased 22% to $32.4 million. instrument revenue was down across all geographies.

al: Down, 49% driven primarily by fewer instruments sold.

al: Looking at our revenue by geography, Americas decreased 7% to $73 $8 million EMEA decreased 8% to $31 $9 million APAC increased 22% to $32 4 million.

al: Instrument revenue was down across all geographies, so strong consumable sales offset the impact in APAC.

Adam Taich: Those strong consumable sales offset the impact in a Turning to the rest of the inquiry... Gross profit for the first quarter was $105.4 million compared to $92.9 million for the prior year period. Gross margins increased to 68% from 66% the year prior, primarily driven by higher license and royalty revenue and lower manufacturing costs, partially offset by increased inventory. Excluding the impact of license and royalty revenue, gross margin was 64%. Total operating expenses for the first quarter decreased to $144.8 million, compared to $154.4 million for the prior year. This decrease was primarily driven by a gain on cell.

al: Turning to the rest of the income statement.

al: Gross profit for the first quarter was $105 4 million compared to $92 9 million for the prior year period.

al: Gross margins increased to 68% from 66% the year prior primarily driven by higher license and royalty revenue and lower manufacturing costs, partially offset by increased inventory reserves.

al: Excluding the impact of license and royalty revenue gross margin was 64%.

al: Total operating expenses for the first quarter decreased to $144 8 million.

al: <unk> to $154 4 million for the prior year period.

al: This decrease was primarily driven by a gain on settlement.

al: R&D expenses decreased to $64 2 million compared to $68 6 million for the prior year period.

Adam Taich: R&D expenses decreased to $64.2 million compared to $68.6 million for the prior year period, primarily driven by lower personnel expenses. including stock-based compensation expenses partially offset by higher lab materials and supply. SG&A expenses increased to $89.7 million compared to $85.8 million for the prior year period, primarily driven by an increase in outside legal and personnel expenses. partially offset by a decrease in market Operating loss for the first quarter was $39.3 million compared to a loss of $61.5 million in the first quarter of last year. Net loss for the period was $34.4 million compared to a net loss of $59.9 million for the first quarter of 2024.

al: Primarily driven by lower personnel expenses, including stock based compensation expenses, partially offset by higher lab materials and supplies.

al: SG&A expenses increased to $89 7 million compared to $85 8 million for the prior year period, primarily driven by an increase in outside legal and personnel expenses, partially offset by a decrease in marketing expenses.

al: Operating loss for the first quarter was $39 $3 million compared to a loss of $61 5 billion in the first quarter of last year.

al: Net loss for the period was $34 4 million compared to a net loss of $59 9 million for the first quarter of 2024.

Adam Taich: We ended the quarter with $427 million in cash, cash equivalents, and marketable security.

al: We ended the quarter with $427 million in cash cash equivalents and marketable securities.

al: Turning to our outlook for the rest of the year as Serge mentioned, we are withdrawing our previously issued annual revenue guidance and in its place we are providing guidance for the second quarter.

Adam Taich: Turning to our outlook for the rest of the year, as Serge mentioned, we are withdrawing our previously issued annual revenue guidance, and in its place, we are providing guidance for the second quarter. The U.S. policy changes have introduced increased uncertainty into purchasing behavior for many of our. As a reminder, approximately 40 to 50% of our revenue is exposed to the U.S. academic and government research funding. We are highly exposed to ongoing uncertainty in the current environment.

al: The U S policy changes have introduced increased uncertainty into purchasing behavior for many of our customers.

al: As a reminder, approximately 40% to 50% of our revenue is exposed to the U S academic and government research funding environment, we are highly exposed to ongoing uncertainty in the current environment.

al: While the change to our guide reflects the current macro funding environment rather than company specific performance. We believe it is prudent to take this step to ensure transparency and to avoid setting expectations with a significantly limited visibility we have under these evolving conditions.

Adam Taich: While the change to our guide reflects the current macro funding environment rather than company-specific performance, we believe it is prudent to take this step to ensure transparency and avoid setting expectations with the significantly limited visibility we have under these evolving conditions. We remain focused on assessing conditions in real time, and we'll reinstate our annual guidance with our visibility on macro impacts to customer spending. For the second quarter, we expect revenue to be within a range of $138 million to $142 million, representing 1% growth sequentially at the midpoint, excluding the impact of the aforementioned license and royalty revenue.

al: We remained focus on assessing conditions in real time and will reinstate our annual guidance with our visibility on macro impacts to customer spending improves for.

al: For the second quarter, we expect revenue to be within a range of $138 million to $142 million.

al: Resenting, 1% growth sequentially at the midpoint, excluding the impact of the aforementioned license and royalty revenue.

al: We anticipate that the funding and macro environment will remain challenged and then ordering patterns will continue to be impacted particularly for instruments and larger consumable orders as customers work through grant delays program cancellations and re prioritized budgets at the same time were incurred.

Adam Taich: We anticipate that the funding and macro environment will remain challenged, and that ordering patterns will continue to be impacted, particularly for instruments and larger consumable orders, as customers work through grant delays, program cancellations, and reprioritized budgeting. At the same time, we're encouraged by the continued strength in core usage trends, including double-digit growth in chromium reactions and broader xenium utilization. In regards to the evolving tariff landscape, we are tracking development very closely. When it comes to components in our products, we have a limited reliance on China in our supply chain. In addition, we have a global manufacturing footprint with nearly all of our manufacturing occurring in the United States and in Singapore.

al: <unk> by the continued strength in core usage trends, including double digit growth in chromium reactions and broader xenia utilization.

al: In regards to the evolving tariff landscape, we are tracking developments very closely.

al: When it comes to components in our products, we have a limited reliance on China and our supply chain. In addition, we have a global manufacturing footprint with nearly all of our manufacturing occurring in the United States and in Singapore.

Adam Taich: Sales to China, which accounted for approximately 10% of our revenue in 2024, is where we see the largest potential. Given our ability to manufacture many of our products in Singapore and other mitigation strategies, we believe the impact from currently proposed tariffs is likely to be minimal.

al: Sales to China, which accounted for approximately 10% of our revenue in 2024 is where we see the largest potential risk given our ability to manufacture many of our products in Singapore and other mitigation strategies. We believe the impact from currently proposed tariffs is likely to be minimal.

al: <unk>.

al: Stepping back from the near term uncertainty, we remain confident in the underlying health of our business and our competitive positioning our teams are executing well customer engagement remains strong and our recent product launches are driving meaningful uptake.

Adam Taich: Stepping back from the near-term uncertainty, we remain confident in the underlying health of our business and our competitive position. Our teams are executing well, customer engagement remains strong, and our recent product launches are driving meaningful uptake. As Serge mentioned, we have recently implemented several cost-saving measures in order to protect our balance. Over the past few months, we undertook a full and detailed review of all of the costs in our business. took actions to reduce our ongoing operating costs. This included a reduction of 8% of our workforce as well as significant reductions in non-headcount spend. Together, we anticipate these measures to reduce operating expenses for 2025 by more than $50 million, compared to 2024.

As Serge mentioned, we have recently implemented several cost saving measures in order to protect our balance sheet over the past few months, we undertook a full and detailed review of all of the costs in our business and took actions to reduce our ongoing operating costs. This included a re.

al: <unk> of 8% of our workforce as well as significant reductions in non head count spend.

al: Together, we anticipate these measures to reduce operating expenses for 2025 by more than $50 million compared to 2024 as a result of these measures. We estimate we will incur between $5 5 billion and $6 5 million of costs, consisting primarily of.

Adam Taich: As a result of these measures, we estimate we will incur between $5.5 million and $6.5 million of costs, consisting primarily of cash severance costs, which will be paid by the end of the third quarter. With our strong balance sheet, we have the ability to continue to execute on our strategy and fuel future innovation.

al: Cash severance costs, which will be paid by the end of the third quarter.

al: With our strong balance sheet, we have the ability to continue to execute on our strategy and fuel future innovation. We believe we are positioned well for long term growth and we are committed to staying agile as conditions continue to evolve.

Adam Taich: We believe we are positioned well for long-term growth and we are committed to staying agile as conditions continue to evolve.

Serge Saxonov: With that, I'll turn the call back to Serge.

al: With that I'll turn the call back to search.

Search: Thanks, Adam.

Serge Saxonov: Thanks, Adam. As we wrap up...

al: As we were above.

Serge Saxonov: I'd like to end on a personal note. I wasn't born in this country, but I love America. I love America, especially because I didn't grow up there. In no other country in the world could I have dreamed of the opportunities that came my way, of being given the chance to make a dent in the U.S. There is no other place we could have started. No other place has such a welcoming culture of boundless innovation and positive ambition. No other place has this concentration of insanely talented people, incredibly sophisticated capital markets, and a remarkable ecosystem across academia and industry supporting scientific innovation.

al: Like to end on a personal note.

al: I wasn't born in this country, but I Love America.

al: Is that I Love America, especially because I didn't grow up here.

al: No other country in the world could I havent dreamed of opportunities that came my way of being given the chance to make a dent in the universe.

al: There is no other place we could have started <unk>.

al: No. Other place is such a welcoming culture of boneless innovation and positive ambition no. Other places this concentration of insanely talented people incredibly sophisticated capital markets.

al: Marketable ecosystem across academia and industry supporting scientific innovation.

al: We're living in a time of incredible progress in life Science.

Serge Saxonov: We're living in a time of incredible progress in life. The mysteries of biology are right in front of us, ready to be unlocked. Scientific progress in the coming years has the potential to bring cures to many, many diseases and completely transform the human condition. We are indeed on the threshold of a golden age. Because we're shooting ourselves in the foot right when we should be pressing on the accelerator. Recent U.S. federal actions are massively hampering the ability of our universities and our government agencies to pursue their goals of advancing science. I'd be the first to tell you that many of these institutions are in need of reform.

al: The mysteries of biology, right in front of us ready to be unlocked.

al: Scientific progress in the coming year, or so has the potential to bring tears to many many diseases and completely transform the human condition.

al: We are indeed on the threshold of a golden age, but we're shooting ourselves in the foot right. When we should be pressing on the accelerator.

Recent U S. Federal auctions are massively hampering the ability of our universities and government agencies to pursue their goals of advancing science.

al: I'd be the first to tell you that many of these institutions are in need of reform, but the current system often suffers from too much process too much villagization and too much bureaucracy. That's younger sciences, an unusual ideas face more challenges than they get in the past.

Serge Saxonov: But the current system often suffers from too much process, too much politicization, and too much bureaucracy. That younger scientists and unusual ideas face more challenges than they did in the past. But overall, these institutions are incredibly valuable and productive. Our university system is the global engine of scientific discovery and the envy of the world. The NIH is the foundational jewel of biomedical programs. We should certainly endeavor to reform and make these organizations ever more effective. But recent federal actions are not doing that. Instead, they're severely undermining these enterprises and run the risk of fundamentally dismantling their ability to support research.

al: But overall these institutions are incredibly valuable and productive.

al: The University system is the global engine of scientific discovery and the envy of the world.

al: The NIH is the foundational dual biomedical progress.

al: We'll certainly endeavor to reform and maintenance organizations ever more effective.

al: The recent federal actions are not doing that.

al: They are severely undermining these enterprises and run the risk of fundamentally dismantling their ability to support research.

Serge Saxonov: And that would be a tragedy.

al: And that would be a tragedy.

Speaker Change: America is the greatest country in the history of the World the Beacon the poll for all of mankind.

Serge Saxonov: America is the greatest country in the history of the world, the beacon of hope for all of mankind. My exhortation to those who are listening. Let's not squander a great inheritance. Let's work to defend and improve our greatest institute. Overall, despite the current turbulence, I remain optimistic. The progress of science and technology just holds so much promise to improve the human condition and create massive value. As always, we're deeply committed to helping that progress and to always be great partners with our. We're focused on discipline and execution as we navigate the current environment while always keeping our eye on the long term.

al: My expectation to those who are listening.

al: No squander, a great inheritance, let's work to defend and improve our greatest institutions.

al: Overall, despite the current turbulence I going to be.

al: Optimistic.

al: The progress of science and technology, just hold so much promise to improve the human condition and create massive value.

al: As always we are deeply committed to helping them progress and to always be great partners with our customers.

al: We're focused on disciplined execution as we navigate the current environment, while always keeping our eye on the long term mission.

al: With that we will now open it up for questions operator.

Operator: With that, we will now open it up for questions.

Operator: Operator. Thank you.

al: Thank you.

Operator: We are now opening the floor for question and answer session. If you'd like to ask a question, please press star followed by one on your telephone keypad.

Speaker Change: Opening their first quick question and answer session, if you'd like to ask a question. Please press star followed by.

Speaker Change: One on your telephone keypad kindly limit your question to one question only your first question comes from the line of Patrick Donnelly with Citi.

Operator: Kindly limit your question to one question only.

Patrick Donnelly: Your first question comes from the line of Patrick Donnelly of Citi.

Speaker Change: Your line is now open.

Patrick Donnelly: Your line is now open. Hey, guys, thank you for taking the questions. Serge, maybe just want to talk through the current backdrop. I mean, can you give us a sense as to what the recent conversations with customers have looked like, let's say, over the last couple of months? Did the NIH and broader academic volatility, did that cause a freezing up by customers that led to this level of uncertainty that drove you to kind of pull the guide? Now that we have the NIH proposal, to your point there, a significant 40%-type cut, has that changed any of the conversations, or is it now we have to wait on the final budget numbers?

Speaker Change: Hey, guys. Thank you for taking the questions.

Speaker Change: Serge maybe just just wanted to talk through the current backdrop I mean can you give us a sense as to what the recent conversations with customers have looked like let's say over the last couple of months did the NIH and broader academic volatility did that cause it's freezing up by customers that led to this level of uncertainty the trove you guys.

Speaker Change: Kind of pull the guide.

Speaker Change: Now that we have the NIH at NIH proposal to your point there are significant 40% pay cut has that changed any of the conversations or is it now we have to wait on the final budget numbers.

Serge Saxonov: I'm wondering, even if it's a double-digit cut, does just having that certainty lead to better visibility from your side and from customer's side? Essentially, just wondering, I guess, the path for you to have that visibility back in the business and seeing a pathway to growth. I mean, does it come down to the budget? Maybe just pull the curtain back a little bit on that. Thank you so much. Yes, Patrick, great question, key question, for sure.

Speaker Change: I'm wondering even if it's a double digit cut just having that certainty lead to better better visibility from your side or from customer side, essentially just wondering I guess the path for you to have that visibility back in the business and seeing a pathway to growth I mean does it come down to the budget, maybe just spoke to cut it back a little bit on that thank you so much.

Patrick Donnelly: Yes, Patrick.

Speaker Change: Great question key question for sure. So let me start with some background color about the conversations with customers and what we're hearing from the field and then ill hand, it over to Adam to talk about sort of implications, how we're thinking about the guide and the progress of the thinking.

Serge Saxonov: So let me start with some background color about the conversations with customers and what we're hearing from the field. And then I'll hand it over to Adam to talk about some of the implications, how we're thinking about the guide and as we progress through the year. As far as the conversations with customers are concerned, as we said on the call, the environment kept getting worse as we proceeded through the quarter, and in fact, the conversations with customers, what we've been hearing, have been getting, in many places, more and more, let's say, dire, in terms of just the lack of clarity and uncertainty about where their funding was coming.

Patrick Donnelly: Thinking about the.

Patrick Donnelly: The number so yes.

Patrick Donnelly: Yeah as far as the conversations with customers are concerned like as we said on the call.

Patrick Donnelly: The environment kept getting kept.

Patrick Donnelly: Kept getting worse as we proceeded through the quarter and in fact, the conversations with customers, where we've been hearing nothing getting any places more and more let's say dire in terms of just the lack of clarity and uncertainty about where the funding was coming from.

Serge Saxonov: The initial news around caps around indirects, that created a lot of uncertainty around a lot of churn. But there was a lot of other activity, and I would say that compared to the initial outlook that people had around this being just an NIH issue or an NIH budget issue, there is a more systemic set of issues now that you have to be looking at when you're looking at academia and government funding in the U.S. Other agencies that are being affected, there is a ton of different procedural issues that are making it very challenging for people to actually get the funds, as well as having like huge uncertainty around where the funds are going to be coming from in the future, or whether they're going to be coming from the U.S.

Patrick Donnelly: The initial news around the capture on indirect though is it does create a lot of uncertainty around a lot of churn, but there was a lot of other activity and I would say that compared to a sort of the initial outlook.

Patrick Donnelly: Oh, it's a little bit that people add around those being just an NIH issue or like in a budget issue.

Patrick Donnelly: There is a more systemic set of issues now and you have to be looking at for when Youre looking at academia and government funding in the U S.

Patrick Donnelly: Other agencies that are being affected there is a ton of different procedural issues that are making it.

Patrick Donnelly: Very challenging for people to actually get the funds as well as having huge uncertainty around where the funds are going to be coming from in the future.

Patrick Donnelly: And whether they're going to be coming.

Serge Saxonov: as well as multiple disputes with universities that are, you know, all of them are large customers of ours as well. So there's sort of a very large cloud of uncertainty that we are hearing from customers, and I think the big theme is just the uncertainty, right? And that has prompted, you know, the different organizations, different institutions to implement, you know, numbers of cost-cutting measures and, you know, reducing their spend in various ways. And so there is an impact that we are certainly seeing right now in terms of spending patterns, but there is also kind of an anticipatory impact that people are baking into their sort of plans or lack thereof.

Patrick Donnelly: As well as multiple disputes with the universities that are all of them are large customers of ours as well.

Patrick Donnelly: So there is sort of a very large cloud of uncertainty that we are hearing from customers and I think the big theme is just the uncertainty right.

Patrick Donnelly: And that has content.

Patrick Donnelly: The different organizations different institutions to implement.

Patrick Donnelly: Our numbers of cost cutting.

Patrick Donnelly: <unk> measures.

Patrick Donnelly: Reducing their spend in various ways.

Patrick Donnelly: So there is an impact that we're certainly seeing right now in terms of spending patterns are.

Patrick Donnelly: But there is also kind of and to anticipate.

Patrick Donnelly: We anticipate any impact of that.

Patrick Donnelly: That.

Patrick Donnelly: People are baking them into their sort of plans or a lack of funds.

Patrick Donnelly: And then maybe Patrick Adam here I could just add to your question sort of around the suspension of guidance and you know I think as you heard from search we've been spending a lot of time with customers out there trying to do our best to support but also to learn so it's a fair question. When we spent a lot of time lag that carefully so.

Adam Taich: Yeah, maybe Patrick, Adam here, I could just add, you know, to your question sort of around the suspension of guidance. And, you know, I think, as you heard from Serge, we've been spending a lot of time with customers out there trying to do our best to support, but also to learn. So it's a fair question when we've spent a lot of time weighing that carefully.

Adam Taich: Philosophically, we believe that forward guidance should enable the investment community to model our business with a reasonable degree of certainty. I think as you just heard from Serge, the fact that... Given the uncertainty, they don't support that standard. Um, as we just talked about kind of in our prepared remarks, we started the year with good momentum, you know, Q1 really multiple positive developments, double digit year on year growth in chromium reactions, strong xenium consumables utilization. Um, you know, it's really confirms what we said when we set up the initial guide and also confirms the fundamentals of our business are robust.

Patrick Donnelly: Philosophically, we believe that forward guidance should enable the investment community to model our business with a reasonable degree of accuracy.

Patrick Donnelly: I think as you just heard from search the facts give.

Patrick Donnelly: Given the uncertainty they don't support that standard.

Patrick Donnelly: As we just talked about kind of in our prepared remarks, we started the year with good momentum Q1, really multiple positive developments double digit year on year growth in chromium reactions strong veniam consumables utilization.

Patrick Donnelly: It's really confirms what we said when we set up the initial guide. It also confirms the fundamentals of our business are robust.

Adam Taich: Um, but since that call, you know, Serge just mentioned funding backdrop, customer confidence, it's worsened materially. Academic and government research budgets tightening NIH grants and the outlays as you sort of track those that remains in flux. And then there's a variety of procedural changes that have been put in place that actually, you know, really disrupt our customers' ability to know their funding levels, and then it makes it difficult for them to commit to projects and programs, you know, for us in the second half of the year. Just as a reminder, you know, 40 to 50% of our revenue is exposed to those U.S.

Patrick Donnelly: But since I call search just mentioned funding backdrop customer confidence, it's worsens materially academic and government research budgets tightening.

Patrick Donnelly: H grants and the outlays as he sort of track those that remains in flux.

Patrick Donnelly: And then there is a variety of procedural changes that have been put in place that actually.

Patrick Donnelly: Really disrupt our customers ability to know their funding levels and then it makes it difficult for them to commit to projects and programs for us in the second half of the year.

Patrick Donnelly: Just as a reminder, 40% 50% of our revenue is exposed to those U S academic and government sources half of that being the NIH.

Adam Taich: academic and government sources, half of that being the NIH. You know, the other sort of, you know, portion of that, you know, the non-NIH federal, you know, state institutional sort of academic and government sources. So the range of possible figure out. become unusually wide due to the unpredictability of that external environment. Generally, we seek to provide as much transparency as possible.

Patrick Donnelly: The other sort of <unk>.

Patrick Donnelly: <unk> of that.

Patrick Donnelly: The non NIH federal.

Patrick Donnelly: State institutional sort of academic and government sources. So the range of possible for your outcomes become unusually wide due to the unpredictability of the external environment generally we seek to provide as much transparency as possible, but given our line of sight into Q2, we've provided guidance for this quarter. Today. However in the second half there are plausible scenarios where conditions improve.

Adam Taich: Given our line of sight into Q2, we've provided guidance for this quarter today. However, in the second half, there are plausible scenarios where conditions improve, and there's others where they deteriorate further. So giving a full year number at this juncture.

Patrick Donnelly: There is others, where they deteriorate further so giving a full year number at this juncture.

Kyle Mikson: would create a false sense of precision and withdrawing it is the most intellectually honest approach until external signals Your next question comes from the line of Kyle Mixon of Category Genity.

Patrick Donnelly: It would create a false sense of precision and withdrawing it is the most intellectually honest approach until external signals to stabilize.

Speaker Change: Your next question comes from the line of Kyle mixing of Canaccord Genuity. Your line is now open.

Kyle Mikson: Your line is now open. Hey guys, thanks for the questions. Adam, on your last point there, could you just maybe provide a little more detail on how you expect the year to kind of play out going forward? Whether it's like, you know, instrumentation versus consumables, you kind of commented on that, or maybe chromium versus spatial to be helpful to understand that. And also, if there was an NIH pull forward in the first quarter, because you saw that from some other folks in the sector.

Speaker Change: Hey, guys. Thanks for the questions I had them on your last point there could you just maybe provide a little more detail on what you. How you expect the year to kind of play out going forward, whether it's like at least from patient versus consumables.

Speaker Change: Any comments around that or maybe chromium burst faithful could be helpful to understand that and also if there is if there wasn't NIH pull forward in the first quarter because you saw that from Sandler folks in the sector and just a second question on what's happening in for Serge.

Kyle Mikson: And just a second question on that, maybe for Serge. Spatial instruments declined, you know, 50% year over year.

Speaker Change: Spatial insurance declined 2% year over year, just comments on the current market dynamics given.

Kyle Mikson: Just comment on the current market dynamics, given, you know, brookers were pretty active, but HVACR, just would love your thoughts on that. Thanks.

Speaker Change: Brokerage, we're pretty active activity ACR, just would love your thoughts on that thanks.

Speaker Change: Yes, I can talk let me take the sort of we didn't see NIH pull forward. So I can start there and then is it.

Kyle Mikson: Yeah, Kyle, I can talk. Let me take it through. We didn't see NIH pull forward. So I can start there. You know, and then is it kind of If we think about the balance of the year, let me start with Q2.

Speaker Change: Got it.

Speaker Change: If we think about the balance of the year, Yeah, Let me start with Q2.

Kyle Mikson: We just withdrew guidance for the second half, so not really in a position to be providing specific outlook beyond Q2. That said, based on what we're seeing today, Q2 is shaping to look a lot like Q1, so consistent trends, similar dynamics. You know, we had, you know, as I think you can see from the numbers, you know, real pressure on the CapEx and the instrumentation side of our business. You know, and consumables held their own, you know, we were flat on chromium consumables and really nice growth on the spatial side, particularly in the xenium side.

Speaker Change: Withdrew guidance for the second half so not really in a position to be providing specific outlook beyond Q2 that said based on what we're seeing today.

Speaker Change: Thank you Joost shaping to look a lot like Q1, so consistent trend similar dynamics.

Speaker Change: We had as I think you can see from the numbers real pressure on the Capex and the instrumentation side of our business.

Speaker Change:

Speaker Change: And consumables held their own.

Speaker Change: We were flat.

Speaker Change: Flat on chromium consumables and really nice growth on the special side, particularly in the Senium side. So when we think about the back half of the year is just a really wide range of possible outcomes. If current trends hold can be reasonable expect sort of flat to low single digit sequential growth trajectory, which is what we've.

Kyle Mikson: So, when we think about the back half of the years, just a really wide range of possible outcomes. If the current trends hold, it could be reasonable to expect a sort of flat to low single-digit sequential growth trajectory, you know, which is what we've sort of baked into our Q2 guide here, you know, versus Q1. So, there's a world where things improve, and we see trends even better than that. The budget, you know, could very well favor spatial and single-cell research relative to other areas.

Speaker Change: Baked into our Q2 guide here versus.

Speaker Change: Q1, so there is a world where things improve and we see trends even better than that in the budget.

Speaker Change: Good very well favor spatial in single cell research relative to other areas, but.

Kyle Mikson: The new head of the NIH has sensible ideas around reforms, and to the extent that money gets unstuck, it could create some upside for us, but also given what we're seeing in the environment, there's a possibility for further deterioration.

Speaker Change: The new head of the NIH, a sensible ideas around reforms and to the extent that money gets unstuck.

Speaker Change: It could create some upside for us, but also given what we're seeing in the environment. There is possibility for further deterioration. So for now we've got the plans we've got the financial means to.

Kyle Mikson: So, for now, we've got the plans, we've got the financial means to execute and respond across a wide range of scenarios, and we're committed to providing an update when we have our Q2 call in. Yeah, maybe, Kyle, on your second question on spatial, spatial instruments and sort of the market dynamics there, like, fundamentally, from the competitive perspective, there hasn't, I wouldn't say there was a material change, similar dynamics that we've seen over the last several quarters, people really, really like our spatial products. They love Genium. In fact, I was at AACR last week and got a lot of really gushing feedback from our customers, just real delight in the kind of data they're seeing, in the kinds of insights they're drawing, and you could see that manifesting itself in various posters and presentations and papers that are coming out.

Speaker Change: To execute respond across a wide range of scenarios and.

Speaker Change: And we're committed to providing an update when we have our Q2 call in August.

Speaker Change: Yeah, maybe a call on your second question on a special.

Speaker Change: Special instruments, so the market dynamics, there, but fundamentally from the competitive perspective, there hasn't I wouldn't say there was a.

Speaker Change: Material change similar dynamics that we've seen over the last several quarters people really really like our spatial products. They love Xenial that I was at ACR last week and.

Speaker Change: Got a lot of really gushing feedback from our customers just really delighted with the Gartner data that we're seeing.

Speaker Change: In the kinds of inside the drawing and.

Speaker Change: You could see that manifesting itself in various posters and presentations and papers that are coming up. So we feel really really good about <unk> position in the market again, the biggest thing the biggest variable the biggest.

Kyle Mikson: So we feel really, really good about Genium's position on the market. Again, the biggest thing, the biggest variable, the biggest reason for the decline is the, you know, is the macro environment.

Speaker Change: The reason for the decline is the is the macro environment Capex has been getting tighter across the world and particularly challenged within the U S, especially from whatever academic.

Kyle Mikson: CapEx has been getting tighter across the world and particularly challenged within the U.S., especially within academics and government.

Speaker Change: And government markets.

Speaker Change: Your next question comes from the line of Doug Schenkel.

Doug Schechnel: Your next question comes from the line of Doug Schechnel of Wolf Research.

Speaker Change: Most research your line is now open.

Doug Schechnel: Your line is now open.

Speaker Change: Hi, This is Madeline moment on great Doug I, just wanted to touch on what you just said about sequential increases throughout the year I think theres a slight step up from Q1 to Q2, the midpoint of the Q2 guide excluding the litigation money what gives you confidence in that but especially in light of your earlier comments that things got increasingly.

Madeline Mollman: Hi, this is Madeline Mollman on for Doug. I just wanted to touch on what you just said about sequential increases throughout the year. I think there's a slight step up from Q1 to Q2, the midpoint of the Q2 guide, excluding some of the litigation money. What gives you confidence in this, especially in light of your earlier comments that things got increasingly dire as the quarter went on?

Speaker Change: Higher as the quarter went on.

Speaker Change: Yeah. Thanks Marilyn.

Madeline Mollman: Yeah, thanks, Madeline. Yeah, so first of all, you're correct. So essentially, the Q2 guide was provided as $138 million to $142 million. That's the range and it represents 1% growth sequentially at What gives us confidence around there? Well, thankfully, we're eight days here into May. We've got pretty good visibility into the order book and the order patterns between now and the end of the quarter. I think that's an important distinction to make, which is it's not that we have sort of lost visibility entirely. It's that we just don't have, given the dynamic environment and sort of the ever changing procedures and other changes that are really impacting our customers' ability to have clarity around funding.

Speaker Change: Yeah. So first of all Youre correct. So essentially the Q2 guidance provided is $138 million to $142 million, that's the range and it represents 1% growth sequentially at the midpoint.

Speaker Change: What gives us confidence around their well thankfully.

Speaker Change: There are eight days here into may.

Speaker Change: We've got pretty good visibility into the order book and the order patterns between now and the ended the quarter, but I think that's an important distinction to make which is it's not that we.

Speaker Change: Or that's.

Speaker Change: Sort of lost visibility entirely.

Speaker Change: We just don't have given the dynamic environment and sort of the ever changing procedures and other changes that are really impacting our customers' ability to have clarity around funding.

Speaker Change: That's really a second half dynamic for us.

Madeline Mollman: That's really a second half dynamic for us in the Q2 here, we've got a pretty good sense of what's going on. And both from a customer segmentation standpoint, and really even from a product and product mix standpoint, it's going to look a lot like Q1.

Speaker Change: Q2 here.

Speaker Change: We've got a pretty good sense of what's going on and both from a customer segmentation standpoint, and really even from a product and product mix standpoint, it's going to look a lot like Q1 did.

Speaker Change: Your next question comes from the line of maintain Caracal of Stephens. Your line is now open.

Mason Carrico: Your next question comes from the line of Mason Carrico of Stephens, your line is now open.

Ben: Hey, guys. Thanks for taking the question. This is Ben on information here.

Mason Carrico: Hey guys, thanks for taking the question. This is Ben on Formation here. I just wanted to hit on the headcount reduction you spoke to and sort of your OPEX initiatives.

Speaker Change: Just wanted to hit on the head Count you head count reduction you spoke to and sort of your opex initiatives.

Mason Carrico: How should we think about that in light of the recent restructuring that you've done and really how does that impact your ability to hire certain commercial teams and the ability to grow going forward? Thank you. Yeah, so, yeah, good question. So, you know, the cards that we implemented have been across the company, kind of touching on every department, but, you know, mathematically, R&D had more of an impact than other functions, just because it's a large, particularly large organization. There was less of an impact on direct sales, on direct sales roles on that organization, because we have just built out that team, that organization, and we do feel strongly that it is now a source of foundation for growth for us for going forward, and we're quite happy and satisfied how that's going.

Speaker Change: How should we think about that in light of the recent restructuring.

Speaker Change: You've done and really how does that impact your ability to hire certain commercial teams and.

Speaker Change: The ability to grow going forward. Thank you.

Speaker Change: Yes.

Speaker Change: Yeah. Good question so.

Speaker Change: The constantly implemented have been across the company.

Speaker Change: Kind of touching on every department, but you'll.

Speaker Change: Mathematically R&D had a had more of an impact than other functions just because it's a large.

Speaker Change: The larger organization.

Speaker Change: There was less of an impact on the direct sales.

Speaker Change: Under our sales roles on that organization.

Speaker Change: Because we have just built up that they see in that organization and we do feel strongly that it is now.

Speaker Change: Source of.

Speaker Change: Our foundation for growth for us going forward and we are quite happy and satisfied how that's going.

Mason Carrico: We fundamentally, really, really carefully considered all of our programs, all our initiatives across the company, and focused the company in the most critical areas, the most critical initiatives, with ideas that we will emerge kind of once we get through this turbulence in a very strong position. We feel good about our ability to retain the talent, and that is something that is very, very important to us.

Speaker Change: We fundamentally really really carefully considered all of our programs or initiatives across the company and focused.

Speaker Change: Our focus of the company in the most critical areas the most critical initiatives.

Speaker Change: With ideas that.

Speaker Change: We will emerge.

Speaker Change: Once we get through this turbulence in a very strong position.

Speaker Change: We feel good about our ability to.

Speaker Change:

Speaker Change: To retain the talent and this is something that is very very important to us going forward and then let me just add just from a P&L impact standpoint, the measures that we've undertaken.

Adam Taich: And then let me just add, just from a P&L impact standpoint, the measures that we've undertaken and that we've announced will reduce operating expense for 2025 by more than $50 million compared to 2024, and also as part of that related to the reduction in force will incur between $5.5 and $6.5 million. predominantly cash severance costs, which would be paid up.

Speaker Change: None that we've announced will reduce operating expense for 2025 by more than $50 million compared to 2024.

Speaker Change: Also as part of that.

Speaker Change: Related to the reduction in force, we will incur between five five and $6 $5 million of costs predominantly cash severance costs, which will be paid off by the end of the third quarter.

Speaker Change: Your next question comes from the line of Dan Arias of Stifel. Your line is now open.

Dan Arias: Your next question comes from the line of Dan Arias of Stifle.

Dan Arias: Your line is now open.

Speaker Change: Hi, This is Paul on for Dan. Thanks for taking my question I'm, just wondering a little bit about sort of the regional view EMEA sales declined as much as the U S against a really tough comp, but the next two quarters have kind of similarly tough comp.

Paul: Hi, this is Paul for Dan. Thanks for taking our question. I'm just wondering a little bit about sort of the regional view. EMEA sales declined as much as the U.S. against a really tough comp, but the next two quarters have kind of similarly tough comps. Is that something that we would expect to see continue? And what are the factors that are kind of holding back customers in Europe and causing that tingle digits decline?

Speaker Change: Is that something that we would expect to see continue in and what are the factors that are.

Speaker Change: Kind of holding back customers in Europe, and causing that.

Speaker Change: Single digit decline.

Paul: Yeah, Paul, thanks. Good question. Good catch. Like, I would say, first of all, to make sure not to over-index on any given quarter, because there are different dynamics around just the timing of different orders and shipments. The fundamental business in Europe is strong. So, yeah, there are some timing effects here. And I would also say there is no question that the CapEx environment year over year, compared to the first quarter of last year, has gotten worse. So, yeah, the instrument environment continues to be challenging. And, you know, I mentioned on the last call, in the last quarter, that from the commercial reorg, our CapEx team was still falling in place.

Speaker Change: Yeah. Thanks. Good question a good test like I would say first of all to make sure not to over index on any given quarter because there are different dynamics around just the timing of different orders and shipments the fundamental business in Europe is strong.

Speaker Change: So yes.

Speaker Change: There are some timing effects there but.

Speaker Change: And I would also say there is no question on the Capex environment year over year compared to the first quarter of last year has gotten worse.

Speaker Change: So yes, so the instruments environment continues to be challenging.

Speaker Change: And I mentioned on our last call last quarter that from a commercial rework. Our capex team was sort of was still falling in place in Europe in particular, it takes longer to hire people there and this was the loss of a piece of the puzzle to fall in place and over the course of this this last quarter, we actually completed the full capex.

Paul: In Europe, in particular, it takes longer to hire people there, and this was the last piece of the puzzle to fall in place. And over the course of this last quarter, we actually completed the full CapEx team in Europe, and it is now in full force. And going forward, we feel optimistic about doing better with the instruments in Genium space.

Speaker Change: In Europe and it is now.

Speaker Change: In full force and going forward, we feel optimistic about.

Speaker Change: You are doing better.

Speaker Change: Instruments and <unk> in particular.

Speaker Change: Your next question comes from the line of Taz <unk> of Morgan Stanley. Your line is now open.

Tejas Savant: Your next question comes from the line of Tejas Savant of Morgan Stanley.

Tejas Savant: Your line is now open. Hey guys, this is Edmond on for Tejas. Thank you for the time. Sticking on the regional view, you guys have really strong consumable sales in APAC. Are you seeing any pull forward of consumables in the region? And more broadly speaking, are you seeing any signs of customers stocking up ahead of potential price increases? I would say that the first order sort of answer here is that there is a there is great underlying demand in Asia, in China, and in Japan, in particular. So the other sort of the other elements to consider is that in Japan, we went direct.

Edmund: Hey, guys. This is edmund on for patients. Thank you for the time.

Speaker Change: On the regional view you guys had really strong consumable sales in APAC are you seeing any pull forward of consumables in the region and more broadly speaking are you seeing any signs of customers stocking up ahead of potential price increases.

Speaker Change: I would say that the first order sort of the answer here is that there is a there is great.

Speaker Change: Demand in Asia, and China and in Japan in particular.

Speaker Change: So the other sort of.

Speaker Change: Element to consider is that in Japan, we are.

Speaker Change: We went through right now we kind of changed our our model of how we do business there and that allows us to capture additional revenue because of that also Q1 as the fiscal year and they're in so that that's the draw of driving additional business. So yeah.

Tejas Savant: Now, we kind of changed our our model of how we do business there and that allowed us to capture additional revenue because of that. Also, Q1 is the fiscal year end there. And so that tends to drive an additional business.

Tejas Savant: So, yeah, so there's a number of structural improvements we made over the course of the past year, both Japan and China, and we're seeing robust demand in those regions, and it is manifesting itself. in strong.

Speaker Change: So there's a there's a number of structural improvements we've made over the course of the past year in both Japan, and China and ER.

Speaker Change: And we're seeing robust demand in those regions and it is manifesting itself in a strong performance.

Mac Sykes: Your next question comes from the line of Mac Sykes.

Matt Sykes: Your next question comes from the line of Matt Sykes of Goldman Sachs.

Speaker Change: Goldman Sachs. Your line is now open.

Matt Sykes: Your line is now open. Hi, good afternoon. Thanks for taking my questions. Maybe just focusing on the Xenium consumable pull-through, which was good to see. And you talked about increasing utilization, particularly amongst the larger customers. Just given the instrument placement has been weaker because of the CABEX environment, how much runway is there for you to continue to increase utilization with existing customers, particularly ones that are a little bit earlier in their cycle in terms of owning the instrument? And do you think that can continue to drive the spatial consumable growth over the course of at least next quarter and for, based on your visibility, the rest of the year?

Mac Sykes: Hi, good afternoon, Thanks for taking my question.

Speaker Change: Maybe just focusing on the Veniam consumable.

Speaker Change: Pull through which was good to see and you talked about increasing utilization, particularly amongst the larger customers.

Speaker Change: Given the instrument placement has been weaker because of the capex environment. How much runway is there for you to continue to increase utilization with existing customers, particularly ones that are a little bit earlier in their cycle in terms of running the instrument and do you think that can continue to drive the spatial consumable growth over the course of at least next.

Speaker Change: And for based on your visibility of the rest of the year.

Speaker Change: Yeah, Matt No question on the answer is yes, absolutely and Thats when were looking at our utilization patterns, we're seeing an increase across the full range of customers. So you know I pointed out.

Matt Sykes: Yeah, Matt, good question. And the answer is, yes, absolutely. In fact, when we're looking at our utilization patterns, we're seeing an increase across the full range of culture. So I pointed out the heavily earliest users are still increasing their usage. I also mentioned new customers kind of ramping up, and it is actually the low users, the medium, and the higher still increasing. So we haven't really reached an asymptote in terms of the biggest users. They're still scaling up. And we have a very large bolus of customers that are still like in the early stages of that curve of adopting as well.

Speaker Change: The the heavily or at least users are still increasing their usage I also mentioned new customers kind of ramping up and it is actually the low users to medium and are the highest still increasing.

Speaker Change: Really reached now some thought in terms of kind.

Speaker Change: The biggest users there are still scaling up and we have a very large bolus of customers that are still like in the early stages of that curve of adopting as well so that as a yes that is certainly one of the reasons why we didn't feel there.

Matt Sykes: So that is certainly one of the reasons why we do feel very bullish about the Xenium potential. And I would say that it is playing out the way that we have talked about before, where this platform fundamentally is incredibly attractive to people, both for the kinds of insights you can get and just the practicalities of getting the data and making their discoveries. But it has this sort of element where it takes some amount of time for people to ramp up on it, right? Because you need to make, typically select your genes, you have to make, do some amount of customization, most customers do.

Speaker Change: We are bullish about the xinyu potential and I will say that it is.

Speaker Change: It is playing out the way that we had.

Speaker Change: <unk> talked about it before what are the slots are fundamental it is incredibly attractive to people both for the kind of insights that you can get in just the practicalities of getting the theater and making their discoveries.

Speaker Change: But it has a it has this sort of an element where it takes some time for people to ramp up on that right because you need to meet tips.

Speaker Change: Typically select the GNC will have to make do some other customization module customers do.

Speaker Change: And that entails an initial sort of burn in period as people kind of go through that but once they get over that base starts steadily what we've been seeing increasing their utilization. So yes. There is a there's a lot of runway even independent of instrument placements cities increasing utilization.

Matt Sykes: And that entails an initial sort of burning period as people are going to go through that. But once they get over that, they start steadily, what we've been seeing, increasing their utilization.

Matt Sykes: So yes, there is a lot of runway, even independent of the instrument placement.

Speaker Change: Your next question comes from the line of Dan Brennan of TD Cowen. Your line is now open.

Dan Brennan: Your next question comes from the line of Dan Brennan of TD Cohen.

Dan Brennan: Your line is now open.

Speaker Change: Hey, Good afternoon, guys. This is Kyle on for Dan. Thanks for taking the questions I wanted to go back to the P&L and the cost out this year and you guys are pretty meaningfully taking cost out this year just given the current environment, but you mentioned in the prepared remarks, there might be some other levers in the P&L you can pull if the current environment sort of continuous can you.

Kyle: Hey, good afternoon, guys. This is Kyle on for Dan. Thanks for taking the questions. I want to go back to the P&L and the cost out this year. You guys are pretty meaningfully taking costs out this year, just given the current environment. But you mentioned in the prepared remarks, you know, there might be some other levers in the P&L you can pull, you know, if the current environment sort of continues.

Kyle: Can you go into more detail about you know, what other areas you think you see the most potential for cuts, at least in the near term? Thank you.

Speaker Change: Go into more detail about what other areas do you think you see the most potential for cuts at least in the near term. Thank you.

Speaker Change: Sure I can.

Kyle: Kyle, I can take a start on that and then turn it over to Serge for additional color if needed. So I think, yeah, I think as you noted, I mean, we're committed to, with the cost actions we've taken thus far, at least $50 million reduction over where we were in 2024. And the way that that breaks down is roughly half of that was coming from headcount, the 8% headcount reduction that we announced today after the market closed. The other half was discretionary spend. And so there is more to be done, you know, particularly in the discretionary spend area.

Speaker Change: Take a start on that and then turn it over to search for additional color if needed. So I think yes.

Speaker Change: I think as you as you noted I mean, we're committed to.

Speaker Change: With the cost actions, we've taken thus far at least $50 million reduction over where we were in 2024 and the way that that breaks down as roughly half of that was.

Speaker Change: It was coming from head count the 8% head count reduction that we are that we announced today after the market closed and the other half was discretionary spend and so there is.

Speaker Change: More to be done, particularly in the discretionary spend area and those are areas really as part of the holistic view that we that we took over the last couple of months.

Kyle: And those are areas really as part of the holistic view that we took over the last couple of months. And, you know, with even more urgency and intensity as the macro situation began to deteriorate a bit more, became a bit more cloudy in March, we learned a lot. And there's more we can continue to take out, you know, as needed. So I think, you know, most importantly, we just want to remain nimble. We've got, you know, our fingers on the pulse of the situation as best as we possibly can. You know, and we're committed to doing what we can to, you know, protect and preserve the strength of the balance sheet.

Speaker Change: And you know with even more urgency and intensity as the.

Speaker Change: The macro situation began to deteriorate a bit more become became a bit more cloudy.

Speaker Change: In March we learned a lot.

Speaker Change: And theres more coffee continuing to tick up as needed. So I think most importantly, I just want to remain nimble, we got our fingers on the pulse of the situation as best as we possibly can.

Speaker Change: And we're committed to doing what we can to protect and preserve the strength of the balance sheet that we have.

Speaker Change: Yeah, I'll just add.

Kyle: Yeah, I'll just add, again, philosophically, you know, we have strong conviction in our markets, in our development, in our team, we're focused on making sure that we capture the opportunities that we see kind of on the other side of the surveillance. But of course, we are agile, and we'll be carefully assessing kind of as we navigate this environment. And we, you know, we have a strong balance sheet, and we will absolutely keep it that way.

Speaker Change: Ultimately, we have strong conviction in our markets.

Speaker Change: In our development and our team.

Speaker Change: We're focused on making sure that we capture the opportunity that we see kind of on the other side of the struggles but of course, we are agile and will be carefully assessing kind of as we navigate this environment and we.

Speaker Change: We have a strong balance sheet, and we will absolutely keep it that way.

Speaker Change: Your next question comes from the line of Luke Shekels.

Luke Sergott: Your next question comes from the line of Luke Sergott of Workplace.

Seyamon Fallouk: Your line is now open.

Speaker Change: Your line is now open.

Speaker Change: This is Sam on for Louise Thanks for taking our questions.

Seyamon Fallouk: This is Seyamon Fallouk. Thanks for taking our questions. First of all, Serge, really appreciated that and to the prepared remarks.

Speaker Change: First of all surge really appreciated that and to the prepared remarks.

Serge Saxonov: But anyways, getting into the question, I'm kind of left with a bit of a niche and long term question here. But given the FDA's recent emphasis on moving away from animal testing in favor of the use of new alternative methodologies, including organoids, and kind of looking in the background of that technology, I noticed some use cases for single cell sequencing when it comes to either researching new organoids or verifying the quality or reproducibility of those or even interrogating the cells after the study. So I'm wondering if you guys have put any thought into, you know, albeit a pretty niche area of single cell.

Speaker Change: But anyway, it's getting into the question I'm kind of left with.

Speaker Change: A bit of a niche and long term question here, but given the fda's recent emphasis on moving away from animal testing in favor of the use of new alternative methodologies, including Organoid.

Speaker Change: And kind of looking in the background of that technology and there is some some use cases for single cell sequencing.

Speaker Change: When it comes to either researching new organoid or verifying the quality or reproducibility of those.

Speaker Change: Or even interrogating the sales after the study so.

Speaker Change: I'm wondering if you guys have put any thought into.

Speaker Change: I'll be in a pretty niche area of single cell not.

Serge Saxonov: Not sure if that's much of a needle mover, but I'm wondering if that is an upside driver in the long term for chromium. No, I mean, actually, that's a really good question. It's actually a really perceptive question. And that's something that has been coming up very consistently as we talk to our biopharma customers. Because if you think about it, it's not just sort of the the endpoint where the FDA is requiring the testing and like it is a core sort of fundamental issue for biopharma for drug development is what systems do you actually test your drugs in?

Speaker Change: I'm not sure if that's much of a needle mover, but.

Speaker Change: I'm wondering if that is an upside driver in the long term for for chromium.

Speaker Change: No no actually that's a really good question, that's actually really perceptive question and that's something that has been coming up very consistently as we talk to our biopharma customers. Because if you think about it it's not just sort of the they had a point where the FDA is requiring that testing is like it is at or sort of a fundamental issue for biopharma.

Speaker Change: Drug development is what systems do you actually test rather than a.

Serge Saxonov: You know, cell cultures are just not They don't represent human biology, or they're not complex enough. And animal models are just like that, too different from humans, right? And for sure, a lot of our customers across the board have been investigating different models, like organoids and different tissue models. And absolutely, single cell and spatial, in fact, are by far the best ways of working with them, both, as you say, in assessing them, whether they do represent the biology you're trying to capture, and then in a production setting, analyzing when you're applying a particular drug to the system, what it's doing, what you expect it to do, and whether it's having any effects that you don't want it to be having.

Speaker Change: Cell culture suggest are not.

Speaker Change: They don't represent human biology, or their own complex enough and animal models, just like dive too different from humans right.

Speaker Change: And for sure a lot of our customers across the board had been investigating different different models like organized and.

Speaker Change: Different tissue models, and absolutely single cell and spatial aside are.

Speaker Change: By far the best ways of working with them, both as you say and kind of of assessing them, whether they do represent kind of the biology of trying to capture and then in that sort of in a production setting analyzing one youre applying a particular drive to the system, whether it's doing what you expect it to do it.

Speaker Change: Whether it's having any effects that you don't want it to having so we actually do see that as well.

Serge Saxonov: So we actually do see that as a very promising and pretty fundamental area of growth for us. Quite a bit about the fact that our tools can be applied just across the full continuum of drug development, and that is definitely one of the kind of core elements of what we've been seeing, where we see the potential is, and still very early.

Speaker Change: Very promising a pretty fundamental.

Speaker Change: Area of growth for US you know I talk a quite.

Speaker Change: Quite a bit above aside that our tools can be applied just across the full continuum of drug development and that is definitely one of the kind of core elements of what we've been seeing where do we see that potential is still very early in this kind of.

Speaker Change: And this opportunity.

Michael Kim: Your next question comes from the line of Michael Kim.

Michael Ryskin: Your next question comes from the line of Michael Ryskin of Bank of America.

Speaker Change: Bank of America. Your line is now open.

Avantika: Your line is now open. Hi, this is Avantika on for Mike. We wanted to know outside of the US, how did A&G hold up? And I know that pharma is like a pretty small part of the business so far. But, you know, how has that trended in 1Q so far? Thank you.

Speaker Change: Turning to Stefan on for Mike.

Speaker Change: If you wanted to know outside of the U at Hartford Engie hold up.

Speaker Change: No that's I think a pretty small part of the business so far but.

Speaker Change: How has that trended in <unk> so far thank you.

Speaker Change: Yeah.

Avantika: Yeah, so I mean, in general, academia and government has held up pretty well outside of the US. Again, different countries create different pressures, and there's different budget considerations, for sure. And especially sort of with the geopolitics being fairly unstable or in flux right now, that creates some pressures. But overall, I think at a high level, the environment has been relatively healthy outside the US.

Speaker Change: So I mean in general Academia and government.

Speaker Change: Held up pretty well outside of U S again different countries different pressures in different budget considerations for sure and a specialist.

Speaker Change: Our specialist sort of of the geopolitics being fairly.

Speaker Change: Unstable are in flux right now there create some pressures, but overall I think at a high level.

Speaker Change: The environment has been relatively healthy outside of the U S.

Speaker Change: You know the business system.

Matt O'brien: Next question comes from the line of Matt O'brien.

Matt Larew: Next question comes from the line of Matt Larew of William Blair.

Speaker Change: Your line is now open.

Matt Larew: Your line is now open. Hi, this is Jacob. I'm for Matt. Thanks for taking the questions. I want to just ask quickly on tariffs, specifically related to China and just the overall demand in that region as well. I think you mentioned you see this as the largest potential risk-related tariff to the business. I mentioned there's ways to ship manufacturing to Singapore and other mitigating efforts. So just wondering, because this demand has held up in this region pretty well with previous quarters. I think it's up double digits now for three consecutive quarters and even at the highest level since the fourth quarter of 2022.

Speaker Change: Hi, This is Jacob on for Matt. Thanks for taking the questions I wanted to just ask quickly on tariffs specifically related to China and just the overall demand in that region as well I think you mentioned do you see this as the largest potential risk related tariffs the business that mentioned theres ways to shift manufacturing to Singapore, and other making up.

Speaker Change: Efforts. So just wondering because the demand has held up in this region pretty well with previous quarters I think it's up double digits now for three consecutive quarters.

Speaker Change: And even at the highest level since the fourth quarter of 2022. So I guess it was first did you see.

Matt Larew: So I guess just first, did you see any pull forward in this region during the quarter?

Speaker Change: See any pull forward in this region.

Speaker Change: During the quarter and then second it is mitigating the potential China tariffs and near medium or long term opportunity and what would the cost were quick to shifting the manufacturing.

Matt Larew: And then second, is mitigating these potential China tariffs a near, medium or long-term opportunity? And what would the cost look like to shifting the manufacturing to nearby regions? And then third, I guess, just what is your or the long-term growth opportunity you still see in that region? Thanks. Sure. Thanks, Jake. Adam here. I can take that. So just on your question on pull forward. No, I mean, it wasn't really a factor for us in Q1. Yeah, I should just take a step back and say, look, we're in a fortunate position of having manufacturing sites inside and outside the United States.

Speaker Change: Two nearby regions and then third I guess, just what is your or the long term growth opportunity you still see in that region.

Speaker Change: Thanks.

Speaker Change: Sure.

Speaker Change: Adam here I can take that so just on your question around pull forward no I mean, it wasn't really a factor for us in Q1.

Speaker Change: I should just take a step back and say look we're in a fortunate position of having manufacturing sites inside and outside the United States and specifically the feeling we have the ability to manufacture most of our products in both locations you know here in the United States and in Singapore.

Adam Taich: And specifically, we have the ability to manufacture most of our products in both locations here in the United States and in Singapore. Our team did a great job reacting to the news, which has been quite dynamic and moving inventory as needed to get product sort of in region and try to do our best to anticipate tariffs in the chain. Most of our single cell products are actually made in Singapore, and we're working on additional mitigation strategies, as you sort of noted, and as we talked about, to have more products originate from Singapore as needed. So, it's really kind of a two-fold dynamic.

Speaker Change: Our team did a great job reacting to the news, which has been quite dynamic and moving inventory.

Speaker Change: As needed to get product sort of in region and try to do our best to anticipate you know tariffs and the changes there.

Speaker Change: Most of our single cell products are actually made in Singapore.

Speaker Change: And we're working on additional mitigation strategies as you sort of noted and as we talked about and to have more products originates from Singapore as needed.

Speaker Change: So it's really kind of a twofold dynamic I think about the revenue side, which we've talked about I mean, you just noted around China and cost impacts for revenue.

Adam Taich: Think about the revenue side, which we talked about, and you just noted around China and cost impacts. For revenue, sales to China would be the biggest risk. It was roughly 10% of our business last year. And the impact, it would be predominantly in our Xenium instruments, which are manufactured here in the United States. We've got proactive mitigation strategies, and we're actually working on some broader mitigation steps. if the tariffs were to persist. On the cost of goods side, we've got minimal reliance on China and other sort of highly tariffed countries rather in our supply chain.

Speaker Change: As to China that would be the biggest risk it was roughly 10% of our business last year.

Speaker Change: And the impact it will be predominantly in our senium instruments, which are manufactured here in the United States.

Speaker Change: Got proactive mitigation strategies, and we're actually working on with some broader mitigation steps if the tariffs were to persist on the cost of good side, we've got minimal reliance on China.

Speaker Change: And other sort of highly tariff companies countries, rather in our supply chain. So we anticipate a real minimal impact to Cogs, given our ability to manufacture most of our products in Singapore. So it's a low single digit million.

Adam Taich: So we anticipate real minimal impact to COGS given our ability to manufacture most of our products in Singapore. So it's a low single digit million supply chain COGS impact if the current.

Speaker Change: Supply chain Cogs impact if the current tariffs remain.

Speaker Change: Your next question comes from the line of Preneed Shaker.

Adam Taich: Your next question comes from the line of Puneet Souda of Lyrinc Partners.

Speaker Change: <unk> partners. Your line is now open.

Philip: Your line is now open. Hey, this is a Philip Entreprenier. Thanks for the question. My question is just on new product launches. Can you just sort of give an update on sort of how the recent product launches have been contributing so far and what you're baking in for 2Q, specifically GEM-X, GEM-X Flex, and some of the other upgrades across Xenium and Vizium HD? And then maybe if you could give us a sense of the mix of GEM-X kits now compared to prior kits. Thanks.

Philip: Hey, this is Philip on for Canadian Thanksgiving.

Philip:

Philip: My question is just on new product launches can you just sort of give an update on sort of how the recent product launches have been contributing so far and what you're baking in for <unk> specifically.

Philip: It sounds like flex and some of the other upgrades cros.

Philip: That's M H D.

Philip: And then maybe if you could give us a sense of the mix of Jive X kids now compared to our.

Philip: Prior kits.

Philip: Thanks.

Philip: Yeah, so like on that last question.

Philip: Yeah, so like on that last question, Philip, so the Genomics at this point is a large majority of what we sell on the Chromium product line. As far as just the contribution of the new products, well, look, last year, we launched a lot of new products all across our platforms. So, by and large, like our business now is driven by those products, those launches, whether it's Visium HD, Visium 5K, all the different Genomics products on the Chromium side. On my remarks earlier, I mentioned that Genomics Flex and on-chip multiplexing are doing particularly well. Now, those are the most recent product launches that we have.

Philip: The Genesis at this point Theres, a large majority of what we sell on a on the chromium.

Philip: Our product line.

Philip: As far as just the contribution of the new products well look last year, we launched a a lot of your products all across our platforms. So by and large you know like our business now is driven.

Philip: By those products those launches, whether it's H D. ASEAN five K all the different <unk> products on our call them inside.

Philip: In my remarks earlier, I mentioned, Oh, that's a July it's floods and the launch of multiplexing are doing particularly well now those are the most recent product launches that we had.

Philip: So.

Philip: So, yeah, I think they're driving demand, they're driving sort of the volume on the Chromium side. And on Spatial, people, like I said, have been really delighted in what they've been able to now discover with these new products, and they are driving our business by a large amount forward.

Philip: Yeah, No I think they are they are driving demand are driving sort of the volume on the Colombian side I'm a special people like I said have been really delighted and and what they've been able to in all discover with eastern products and they are driving our business are biological in Florida.

Speaker Change: Your next question comes from the line of Rachael Ray.

Rachel Ventsdal: Your next question comes from the line of Rachel Ventsdal of J.P.

Speaker Change: J P. Morgan your line is now open.

Rachel Ventsdal: Morgan. Your line is now open. Great, thank you.

Speaker Change: Great. Thank you. This is Casey on for Rachel Thanks for taking my questions.

Rachel Ventsdal: This is Casey on for Rachel. Thanks for taking our questions. So first one just on gross margins looks like they were a bit light in the quarter versus where the street has been X the settlement. So just curious if you can elaborate on the current margin profile relative to your expectations and maybe what you're assuming for 2Q. And then, you know, as a follow up for 2Q, you said you have a bit more visibility there. You know, I guess at the midpoint, what are you assuming for placements between Visium, Xenium and Chromium in the quarter?

Speaker Change: First one just on gross margins looks like they were a bit light in the quarter versus where the street had been ex the settlement. So just curious if you can elaborate on the current margin profile relative to your expectations and maybe what youre assuming for <unk> and then as a follow up for <unk>. You said you have a bit more visibility there I guess at the midpoint what are you assuming for placements between Vivian Xu Mayhem.

Speaker Change: Chromium and the quarter. Thank you.

Rachel Ventsdal: Thank you.

Rachel Ventsdal: Casey, I can answer your question as it relates to, you know, on the margin side of things. Yeah, I mean, so the margins excluding the vision settlement were 64%. So it's kind of in the zone of our sort of historical range. What I would note, and we put in the press release, we did have higher than normal levels of inventory reserves related to product transition. That occurred there in Q1. As it relates to Q2 and sort of thinking about that going forward, typically the biggest driver of variability in our gross margins is Xenium instruments. Sort of mix of instruments versus consumables and given that we're anticipating Q2 really from a product mix standpoint to look more similar to Q1.

Speaker Change: I can answer your question as it relates to on the margin side of things.

Speaker Change: So the margins excluding the vision settle over 64%. So it's kind of in the zone of our sort.

Speaker Change: Sort of historical range, what I would note.

Speaker Change: We put in the press release, we did have a higher than normal levels of inventory reserves related to product transition.

Speaker Change: That occurred there in in Q1.

Speaker Change: As it relates to Q2.

Speaker Change: Sort of thinking about that going forward typically the biggest driver of variability in our gross margins is zinia instruments.

Speaker Change: Sort of mix of instruments versus consumables.

Speaker Change: And given that were anticipated in Q2 really from a progress standpoint to look more similar to Q1 I mean, we're not currently anticipating that same level of inventory reserves, we would expect gross margins to improve modestly from sequentially from Q1 into Q2.

Rachel Ventsdal: I mean, we're not currently anticipating that same level of inventory reserves. We would expect gross margins to improve modestly from. sequentially from Q1.

tighter Peterson: Our last question for today comes from the line of tighter Peterson of Jefferies. Your line is now open.

Tejo Peterson: Our last question for today comes from the line of Tejo Peterson of Jeffries.

Tejo Peterson: Your line is now open. Hi guys, this is Priya for Tycho. Thanks for taking our question. You mentioned spatial cell opportunities regarding your biopharma customers. Can you talk more about any trends you see within your biopharma customers and what you've been hearing from them? I think you are also baking in for QQ and beyond. Yeah, so as far as biopharma, kind of if we zoom in on just sort of the first quarter, there's a number of moving pieces there. I would say that, you know, biotech has definitely been under pressure. The capital markets have been tough.

Speaker Change: Hi, guys. This is for Tycho thanks for taking a question.

Speaker Change: You mentioned you saw opportunities regarding your Biopharma customers can you talk more about any trends you see within your biopharma customers and.

Speaker Change: <unk> been hearing from them I think you are also baking in for Q2 and beyond.

Speaker Change: Yeah, so as far as Biopharma kind of zoom and it'll just sort of the first quarter.

Speaker Change: There's a number of moving pieces, there I would say that.

Speaker Change: By a dog so.

Speaker Change: Definitely been under pressure and in the.

Speaker Change: The capital markets have done stuff there's a.

Tejo Peterson: There's a number of competitive dynamics there that make the whole space very challenging, and that was definitely under pressure. We saw that in our business. That said, there's a number of biotechs with a lot of funding who are big users of single-cell, who believe, for example, in this kind of AI-based approaches to target and drug discovery, and are leaning heavily into single-cell and spatial. On the larger pharma side of things, there's also some amount of commotion as companies have been restructuring their investments and priorities, but the business overall has been doing well.

Speaker Change: There's a number of sort of competitive dynamics there to make it the whole space very challenging and Oh that was somewhat under pressure we saw that in our in our business.

Speaker Change: There is a number of biotechs with a lot of funding or who.

Speaker Change: Or a big.

Speaker Change: Users of single cells I believe for example in the in this kind of AI based.

Speaker Change: Our approach is to target and drug discovery and <unk>.

Speaker Change: And even heavily into single cell and spatial on the larger pharma side of things Theres also some some amount of kind of promotion of the companies that have been.

Speaker Change: Restructuring their investment and the.

Speaker Change: And priorities for the business overall has been has been doing well.

Tejo Peterson: Now, zooming out a bit, pharma has been a priority for us, as I talked about it last year. That was one of the reasons for us to do our sales team restructuring. We're now in a great position, given the capabilities of our products, the ability to work with FFP, clinically relevant samples, the ability to scale now, the pricing configurations that we're now delivering, the workflow investments, all of that, and together with now the fully formed sales team that's focused exclusively on biopharma, we feel really good about being able to make progress. In fact, we're starting to see some progress along these lines.

Speaker Change:

Speaker Change: Zooming out a bit.

Speaker Change: Pharma has been a priority for us as I talked about it last year that was one of the one of the reasons for us to do our sales team restructuring. We're now in a great position given the capabilities of our products the ability to work with a M. F. A b kind of clinically relevant samples and let the ability to scale now the <unk>.

Speaker Change: <unk>.

Speaker Change: Ah configurations that were now delivering the workload.

Speaker Change: Investments all of that together with the now fully formed sales team to focus exclusively on Biopharma.

Speaker Change: Feel really good about being able to make progress and in fact, we're starting to see some progress along these lines.

Tejo Peterson: And like I said earlier, I mean, the exciting thing for us is that we have, as you look at the whole continuum of drug development, of the drug development process, there's applications, like critical applications. for Single-Cell and Spatial, all through that continuum. And also, kind of as I referenced in my remarks earlier, there's now been also new publications that have been coming out that are pretty rapid cliff, kind of showing the use of single-cell and spatial to understand clinical tissue samples and being able to predict drug response to that. And that is obviously of great value, especially as we think about kind of later stages of drug development.

Speaker Change: As I said earlier I mean.

Speaker Change: I think for US is that we have.

Speaker Change: As you look at the whole continuum of drug developmental, but the drug development process, there's application like critical obligations.

Speaker Change: Core single cell and spatial ortho that continuum.

Speaker Change: And also kind of as I referenced on the call.

Speaker Change: My remarks earlier.

Speaker Change: Theres not been also new publication of the ethane coming out at a pretty rapid clip kind of showing the use of single cell and spatial to understand.

Speaker Change: Claims clinical tissue samples and being able to predict the drug.

Speaker Change: Drug response, so that they're not as obviously, a great value a specialist, but think about kind of later stages of.

Speaker Change: Drug development.

Tejo Peterson: So, you know, our goal, ultimately, over time is to get to 50% or more of our business coming from biopharma. You know, we won't get there overnight, but... My expectations, step by step, will make our way.

Speaker Change: So you know our goal ultimately over time is to get to.

Speaker Change: 50% or more of our business coming from Biopharma, we wont get there overnight, but are kind of my expectation step by step.

Speaker Change: We'll make our way back.

Speaker Change: Thank you we have reached the end of our Q&A session. Thank you. So much for attending today's conference call. You may now disconnect Goodbye.

Tejo Peterson: Thank you.

Operator: We have reached the end of our Q&A session. Thank you so much for attending today's conference call. You may now disconnect. Goodbye.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change:

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Yeah.